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Why Tesla Stock Fell Sharply Friday

By Daniel Sparks - Updated Mar 13, 2020 at 1:18PM

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Shares have now fallen 45% from an all-time high earlier this year.

What happened

Shares of electric-car maker Tesla (TSLA -1.76%) tumbled on Friday, declining as much as 10.4%. As of 12:42 p.m. EDT, however, the stock was down 5.7%.

The stock's decline extended a massive pullback in the price recently. Shares are now down 45% from an all-time high achieved earlier this year. The decline on Friday may be part of a broader correction as investors reconsider the electric-car maker's valuation after a huge run-up exiting 2019 and in the beginning of 2020.

Tesla's factory in Fremont, California

Tesla's factory in Fremont, California. Image source: The Motley Fool.

So what

Though shares of Tesla have plummeted recently, they are still notably up 115% year over year. This highlights why the stock's continued decline on Friday may be part of a big correction after shares surged in late 2019 and in the beginning of 2020.

Of course, the stock has also declined along with the broader market recently. The S&P 500 is down 25% since Feb. 19 as fears about the spread of the COVID-19 coronavirus triggered a sell-off that ultimately led to the end of the longest bull market in history. But the S&P 500 is notably up a few percentage points on Friday, even as Tesla shares are down.

Some investors and analysts may be concerned that challenges resulting from the coronavirus will lead to weaker-than-expected sales for Tesla's vehicles in 2020.

Now what

Though Tesla hasn't reported any vehicle deliveries for 2020 yet, the automaker is set to share first-quarter deliveries in the first few days of April. In addition, the automaker seems to be optimistic about its growth prospects, as CEO Elon Musk recently announced that it is searching for locations to open new factories: one for production of its Cybertruck and another for additional Model Y production capacity.

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